Reddit Posts Strong Q2 Results but Flags Choppy Search Traffic
Reddit reported second-quarter revenue of $805 million, a 61 percent increase from the same period a year earlier, and net income of $253 million, up 183 percent. Both figures exceeded Wall Street expectations. The company also guided for third-quarter revenue of $860 million to $870 million with healthy earnings, above consensus forecasts.
Despite the results, shares fell more than 10 percent in after-hours trading. The decline followed comments in a shareholder letter from chief executive Steve Huffman, who wrote that “search referrals were choppy in the quarter, and traffic was more volatile later in the quarter.” He added that the broader commercial business remained strong.
Investors appear concerned that artificial-intelligence features in search engines, particularly Google’s AI summaries, are reducing referral traffic to Reddit. In 2024 the company signed a deal to supply content to Google for AI training. Reddit has since indicated uncertainty about whether it will renew the arrangement.
User metrics presented a mixed picture. Global users rose, but daily active unique users in the United States edged down slightly to 53.2 million from 53.5 million in the first quarter.
During the earnings call, analysts pressed management on the potential impact of AI on audience growth. One asked whether the company faced a “user problem, especially in the U.S.,” citing pressure on logged-out traffic as search shifts toward AI-generated answers and the resulting difficulty in converting those visitors into logged-in users. The analyst also questioned the likelihood of continued data-licensing deals with Google and OpenAI next year.
Huffman responded that Reddit’s core offering of communities and conversation should continue to attract users. “Communities are universal, and so we think we have in the U.S. content for everyone, and it’s a matter of revealing that,” he said. On the Google relationship, he noted that ties predate the formal licensing agreements and stated there is no binary outcome. “We will make sure that we’re maximizing the value for Reddit,” he said.
